Personal Finance Blog

Tips And Stories To Help You With Managing Money

How To Get A Good Credit Score

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improving-your-credit-scoreWant to be the kind of consumer the creditors want? The kind that they bend over backwards to accommodate? The sort that breezes through a loan process with nary a wrinkle? It can be done.

At the crux of it all is your credit report. That’s the elusive data collected by credit reporting agencies that only surfaces when your finances are being discussed, usually with large ticket purchases in mind –things such as houses and cars.

The reporting agencies use a system known as FICO to create an individual credit profile, an acronym derived from the name of the California company that developed the method. Scores range from 300 (Don’t even ask for credit) to 800 (You’re a shoe-in.) Though there are critics who say the factors used to create a credit report are not the only ones that should be considered, the reports are a fact of credit life today. Thirty-five percent of the rating is based on payment history; 30 percent on amounts owed; 15 percent on the length of credit history; 10 percent on new credit and 10 percent on types of credit.

Things you can do to improve your credit rating:

1. Make payments on time. If you begin making payments late or, worse, missing them, the resultant penalties and fees will be factored into your credit report.

2. Don’t use a credit card that charges an annual fee. Shop around until you find a card that doesn’t charge fees and still offers rewards. That general rule might be set aside if you find a card with a fee that is counterbalanced with low interest, generous benefits and other features that cancel the effect of the fee. A word of caution: constantly shopping for a “better” credit card may build a perception that you are having trouble managing debt. It all goes into the record. Sticking with a particular card for a long time shows financial stability.

3. Never max out your credit availability. Using less than 30 percent of the credit for which you qualify is good practice. Utilizing several lines of credit, such as mortgage, car payments, etc., as well as credit cards, also helps the score, as long as you conform to the agreed-upon terms.

4. Monitor your credit rating. Credit reporting services are required to furnish a report to you annually. Some banks now are providing this service to customers, overturning earlier practices that made procuring the information difficult. If you find questionable information in your report, act immediately to correct it.

Critics of the current method of creating credit reports argue that it overlooks some very important factors. For instance, it does not make allowances for people who simply don’t use credit. That means it discriminates against the potentially best customers, the so-called “credit invisibles.”

Regardless of the perceived flaws, it is the system now in use, and if you are credit-wise you can do things to improve your rating, whether or not you are a big user of credit.

Be Aware Of Changes In Tax Laws For 2015

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Standard deductions have risen to $6,300 for individuals and $12,600 for married taxpayers filing jointly.
Standard deductions have risen to $6,300 for individuals and $12,600 for married taxpayers filing jointly.
Hundreds of thousands of Americans are well into the annual tax frenzy, though the deadline is a month away. There are some changes in tax law for 2014 and 2015 that you need to consider as you prepare a return.

Health Insurance

You may be subject to a penalty if you have not conformed to the mandates imposed by the Affordable Health Care Act. In 2014, the penalty is 1 percent of your household income or $95 per person if you have not obtained health insurance as required by the act. The penalty will rise to 2 percent of income or $325 per person in 2015. Get health insurance quickly to avoid this penalty.

Contributions

The limit an employee can contribute to a 401(k) will increase to $18,000, up $500 from last year’s cap. You needed to contact your payroll department at the first of this year to take advantage of the higher allowable. The “catch-up” allowance for those over 50 also has been increase, allowing for an additional $6,000 in contributions, $500 more than was allowed a year ago. The flexible spending cap for qualified health expenditures now is $2,500, $50 increase over the previous year.

Standard Deductions

Standard deductions also have risen, to $6,300 for individuals and $12,600 for married taxpayers filing jointly. Those figures are up $100 and $200 respectively. The standard deduction is important especially if you cannot itemize.

Changes In Tax Rates

For the tax year beginning in January, income tax thresholds have again been adjusted for inflation. The highest tax rate of 39.6 percent will apply now to single filers who earn over $413,200 and to married couples whose earnings are $464,k850 or above. The increase is about 1.6 percent over tax year 2014.

IRA Rollovers

IRA rollovers starting in 2015 are limited to a single event in a 12-month period. But you can still make as many “trustee to trustee” transfers as you like, moving your money from one provider to another. The new IRA rule is aimed at preventing the practice of withdrawing all the funds and then re-depositing them in a new account, a tactic some were using to create, in effect, a short-term, interest-free loan. Limit all rollovers to direct transfers in 2015 if you plan on moving money more than once.

Alternative Minimum Tax

The Alternative Minimum Tax exemption for 2015 is increased by 1.5 percent from 2014. Caps now are $53,600 for individuals or $83,400 for joint filers.

Lower Gas Prices Provide Extra Money For Families

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March 3, 2015 - Low Gas Prices around the country. At the Chevron station at 1284 Vine St & 1300, Murray, Utah - $1.88 a gallon.
March 3, 2015 – Low Gas Prices around the country. At the Chevron station at 1284 Vine St & 1300, Murray, Utah – $1.88 a gallon.
Financial experts predicted that American families would quickly pour the money they saved on precipitately dropped gasoline prices back into the economy. But the figures are proving them wrong. The money saved in the lowest gas prices in five years isn’t showing up in consumer reports.

In January, Americans in the aggregate spent some $6.7 billion less at the pump. But retail sales, excluding gas, actually dipped a bit from November to January. The figures suggest that consumers are using the money they save in gasoline purchases to reduce debt or increase savings. That is a carry-over from the Great Recession that made serious inroads into the country’s economy and left the average American a little leery of spending. Although that impedes economic growth in the near-term, it could have positive effects in the future, the experts say.

They are predicting annualized growth of 2.5 percent from January through March, a half point under the 3 percent they had forecast earlier.

Gas prices continue to remain low, although they have risen somewhat. In January, the average per-gallon price of $2.03 per gallon was the lowest since 2009. The price had gone up to $2.24 by late February, but that still is $1.10-per-gallon less than a year ago. The annual savings to a typical household is about $750, according to the Energy Information Administration. To keep a pulse on the changes in prices visit GasBuddy.com.

But with the left-over cautions bred by the recession still echoing, much of that savings will remain pocketed, the administration predicts. Americans are still cautious about overspending. They are saving more instead. The rate of savings rose to 4.9 percent of earnings in December, compared with 4.3 percent in November. Last month, the rate bumped up again, to 5.3 percent, the highest in a year and a half.

Some economists note that the savings from gas purchases are small, although they can grow over time. The cumulative effects don’t show up quickly. Also, many Americans are skeptical that the relatively low gas prices will last. They are cautious about spending the difference when it could be used to help reduce debt. The phenomenon is not new. Economists are aware that consumers tend to “wait and see” before they feel free to spend “found” money they hadn’t figured into their budgets. A lag of several months is typical.

Even so, signs indicate that the money will begin to make an impact on the economy in the coming months. New cars is one of the places it may be spent. Families that put off replacing a vehicle when the economy was sour may feel confident enough to make the splurge. In early 2013, the average age of a car in the U.S. was at a high of nearly 12 years. But last year, more families replaced their clunkers and car sales were at the highest in eight years. And the trend seems set to continue.

Let A Good Budget Be Your Guide

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Dave Ramsey recommends having an emergency fund of three to six months of expenses in place.
Dave Ramsey recommends having an emergency fund of three to six months of expenses in place.
A budget is not the enemy. It is a road map that can keep you from crashing into the roadblocks that cause economic strain for many Americans, according to a set of “Your Life, Your Money” interviews. Without one, you’re flying blind.

Rule Number One of personal finance is a simple one: You can’t spend more than you have coming in without consequences. Rule Number Two is also simple: Save something from every pay check and you’ll build security and the ability to make necessary purchases without stress down the road.

One of the common flaws with budgeting is that people write into the budget what they know, things such as rent, food, utilities, insurance, transportation costs, tuition payments, etc. What breaks the budget are the things that don’t get written down, such as what you spend for cabs, coffee breaks, newspapers and all the little “pick-up” items that seem necessary at the moment. Write it down, whether it is an $800 computer or a $2 magazine. When you have a clear picture of the usual amount of spontaneous spending you are doing, allow yourself a certain amount for un-budgeted items and don’t go over the allowance.

Keep a spending diary that lists every item you buy for a period of time. It may help you discover how come the end of the pay period too often finds you without funds.

A simple way to analyze your spending habits is to download your banking transactions for a period of a year. Import the data into Excel. Sort the payees to help you categorize transactions. You can easily total the amounts your are spending at Starbucks or your favorite restaurant. Get totals on your utilities, housing and other fixed payments as well as your leisure spending. When you get this bird’s eye view of your spending, then you can make new decisions to help you create a workable budget that cuts unnecessary spending.

Don’t spend without thinking about it first. Impulse buying gets you into trouble. If it isn’t in the budget, you can do without. And give serious thought to what is really necessary and what simply sounds attractive at the moment. A little bit of sacrifice now may buy you a lot of security as time goes by and you gain control of your income and put it to work for you.

What Would $40 Do For You?

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A $40 increase in income means a lot.
A $40 increase in income means a lot.
If Congress doesn’t extend the payroll tax cut, it will mean a typical family earning $50,000 annually will lose about $40 per pay period to Uncle Sam. In this day and age, is $40 even worth quibbling about?

A White House open survey of American households indicates that $40 can, in fact, mean a lot in some households. Responders to the White House site offered these perspectives on what the loss would mean to them:

To an individual in Oregon, “Forty dollars means the difference to me in buying gas or paying my electric bill. I am disabled and so I am on a very extremely tight monthly income.”

“The $40 means that my kinds can continue to wear decent clothes and I can afford to give them opportunity to participate in school programs that are not funded through the state and federal funding,” said a Minnesota parent.

A Massachusetts response indicated that the individual would be unable to help a brother in serious need. “The $40 I would lose is money I send to help my brother. He has had a myriad of health problems over the past two years and has only been able to work intermittently. He recently was diagnosed with inoperable cancer and has no health insurance. Some say it isn’t a lot of money, but my brother wouldn’t have food in his refrigerator without it.”

”Forty dollars less per pay check means I will have to pick between my insulin and the water bill. It means never being able to see my doctor, even though I have insurance,” wrote a New Mexico resident.

From Texas came a similar response: “Forty dollars per paycheck allows me to continue to pay co-pays to doctors for necessary medical treatment needed to control debilitating disease.”

For her family of five, the $40 means a home-cooked meal or new clothing for two of her children, explained a writer from Alaska.

The amount is HUGE, according to a California resident. “I am supporting my adult daughter and her four children.”

“This is nearly what a typical electric bill costs me each month,” wrote a Floridian. “Mine usually runs $40-$50, even though I can’t afford heat or air.

The forty dollars per paycheck is what “allows my son to have hot lunches at school,” said a responder in Hawaii.

For many many Americans just a small amount makes a difference to the quality of their lives.